Stephen Cadogan: Chickens come home to roost for Dutch dairy industry

In 2015, more than 1,600 Irish farmers incurred penalties totalling €1.8m for breaches of the 170kg of nitrates per hectare limit.

However, Dutch farmers have been allowed increase milk production by 25% since 2011, even though the country operates under an exemption from EU pollution laws which allowed only a 10% milk increase.

As a result, production on Dutch farms of phosphate, which contaminates groundwater, has exceeded permitted EU levels for several years.

Irish farmers can be forgiven for thinking the dairy industry here has lost out, because we slavishly follow EU rules, while the Dutch increased cow numbers 19% since 2011, and milk production by more than two times the EU permitted level.

The dairy industry worldwide is now waiting to see what action the EU will take against the Netherlands, which has proposed a plan to cut back its cow numbers 10%.

However, the EU could come down hard by ending the exemption granted to the Netherlands since 2006, allowing it use extra nitrogen fertiliser, because one of the conditions was that phosphate pollution be controlled.

That course of action would result in the Dutch industry being slashed 25%.

With output in 2015 valued at €6.5 billion, and an estimated annual contribution worth €7.1bn to the Dutch economy (including 13,800 jobs), the Dutch dairy industry and economy would be dealt a serious blow if the EU comes down hard.

On the other hand, environmentalists in the country say the Dutch government did nothing to control milk production after the EU milk quota was scrapped in 2015, even though they knew what the environmental consequences would be.

This raises the suspicion that the government was happy to allow farmers expand, until the nitrogen fertiliser exemption expired on December 31, 2016, forcing the EU’s hand. The Dutch government may be happy to have got so far, and will now try to work out a political agreement with the EU which will allow the dairy industry hold onto as much as possible of its “ill-gotten” gains.

One of the political weapons the Dutch government can utilise is that Brussels coming down hard would force the slaughter of half a million dairy cows, rather than the 190,000 cows the Dutch dairy industry proposes to cull.

This could get the strong animal welfare lobby on their side — and prevent an even deeper further slump in the already depressed beef market.

The Dutch phosphates issue is also coming to a head at a very politically sensitive time, ahead of the Dutch general election in March, in which the anti-European Union Freedom Party led by Geert Wilders is poised to win the largest number of seats.

The EU may fear that coming down hard on the Dutch now may topple another domino to follow Brexit.

On the ground, Dutch farmers are furious at the politicians and experts who they say failed to foresee that the end of milk quotas would land farmers in severe phosphate trouble.

Since 2014, many of them have been loss-making, due to a low global milk price.

Now, as milk price recover, they are asked to cut cow numbers of 10%, and might yet be forced to cut 25%.

Since 2008, everyone knew EU milk quotas would end in 2015, but not enough seems to have been done to ensure dairy farmers kept under the phosphate ceiling in place since 2006.

It was only in 2015 that the Dutch government got down to haggling with the European Commission, proposing a system of phosphate rights.

But the Commission rejected this last October, citing state-aid rules on illegal government support.

Recognising that it was facing a possible calamity, the Dutch dairy sector late last year proposed its own solution, including removal of 190,000 cows (10%).

If that is accepted by the EU, the industry would still have some gains to show, compared to EU-compliant countries like Ireland, where farmers can expect to be punished to the full letter of the law for environmental breaches.